Retire debt-free with a million-dollar TSP?

Retiring with a guaranteed lifetime annuity linked, in whole or part, to inflation is a good thing. Topping it off with a Thrift Savings Plan balance hovering near the million-dollar mark is even better. That’s more likely for feds than for many private workers whose 401(k) plans don’t offer anything like the generous match Uncle Sam provides for Federal Employee Retirement System (FERS) investors.

But smooth financial sailing in retirement is not going to happen if you have a mountain of debt to credit card companies, you still owe the bank that holds your mortgage, or one or more rooms of your house or apartment are full of fake jewelry you bought off one of those TV shopping channels. Then you will find yourself holding a mixed financial bag paying more taxes than you probably expected while still navigating a mountain of debt.

But there is a way, according to Abraham Grungold. He’s had a long, successful financial career, done well with his TSP investments, and now acts as a financial coach for other government workers. He says most feds can retire well-off and debt-free. The concept is easy: Pay yourself first. Knowing it is easy. The hard part is doing it. He thinks that the current COVID-19 crisis is the perfect time to put your plan in action.

Here’ what he is telling clients:

It is a simple concept to save for your retirement. It is called “Pay Yourself First.” The Thrift Savings Plan allows employees to make pre-tax contributions. So, you put in five percent and the government matches five percent. Not contributing to the first five percent is like giving up an annual five percent raise/bonus.

I know many federal employees who are focused on paying their home mortgage and paying off their credit card debt. With respect to your retirement this is a big mistake. If you have bad spending habits at least paying yourself first can put you in the right place when you are in retirement mode.

So how do you rid yourself of your credit card and mortgage debt? It’s called living on a budget and minimizing your expenses. Give up that Starbucks coffee and eating out for lunch every day. Also, you should consider getting a second part-time job. Hopefully, during the COVID 19, you have been able to save money by not eating in restaurants and making personal purchases that are only necessary.

During my federal career, I always paid myself first and it has certainly paid off. During my first 12 years of Federal Service, I realized paying myself first was causing me to fall short in paying my monthly expenses. During these years, I worked an additional part-time job outside of Federal Service. Long before my federal career, I always paid myself first by contributing to a personal IRA, with long term investments.

In addition, to paying myself first, I have always lived on a budget never spending more than I had in my bank account and never buying a large expensive home, only one that I could really afford. I guide my clients on how they can achieve these goals.

Living on a budget and monitoring your expenses is the biggest factor that everyone needs to consider. Reviewing your expenses and checking that you are getting the best price for insurance, cable and phone service is the easiest way to pay yourself first.

Contact Abraham Grungold with any questions or comments at Grungold LinkedIn or his Facebook page at FERS Federal Employees.

Nearly Useless Factoid

By Brian Bradley

Built in 1986, the Wave Organ in the San Francisco Bay amplifies the sounds of the waves in the bay. The source of the organ’s sound is columns of air within the pipes that constantly change as water moves in and out. As the length and volume of the air column in each pipe changes, the sound pitch also varies.

Source: Atlas Obscura